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Theo Epstein Says Baseball Operations is Spending Every Dollar Available, and Payroll is Maxed Out

Chicago Cubs President of Baseball Operations Theo Epstein was on The Score yesterday to discuss a variety of things, including the Cubs’ exceedingly poor start to the 2013 season. You can listen to the audio of his appearance with McNeil and Speigel here – it’s always useful to hear from Theo. Among the topics: the amplified feel of April (even if it’s unreasonable, given the sample sizes), Dale’s comments about demoting players, the problem with fundamentals (incidentally, Theo said one way to address the problem is to bring in fundamentally sound players, identifying David DeJesus, Nate Schierholtz, and Luis Valbuena by name (interesting choices, eh? especially that last one … is Theo sending a message?)), and more.

The conversation, though, turned to the financial side of things – as it always does these days – and Epstein had some interesting things to say. None of it deviated too substantially from what he’s said before, but there was an additional sense of … I don’t know what exactly … urgency? Frustration? It certainly sounded like frustration. Whether he’s frustrated by the questions or by the financial constraints he’s finding, I don’t know. But his comments stuck in my craw since I first heard them yesterday, and it wasn’t until I sat down to write this that my thoughts finally crystalized.

Specifically, Epstein was asked why, in a market like Chicago and with the theoretical revenue advantage available to the Cubs, the Cubs couldn’t focus on rebuilding but also “try just a little bit harder” to put a non-laugher on the field.* After emphasizing that this cuts to the very heart of why the Wrigley renovation and new TV deal are so important, Epstein sounded a bit annoyed.

“It’s not a choice,” Epstein said of the build-for-the-future/win-in-the-present dichotomy in his interview with The Score. “We are not making a fundamental choice to only focus on the future. We’re not withholding dollars from this year’s team. We are spending every dollar that we have on this baseball team. We maxed out our payroll last year and we maxed out our payroll this year. It’s not a choice. It’s not like we’re making a conscious decision to say, ‘Hey, let’s withhold $15-20 million from the 2012 or 2013 payroll because we don’t think we’re quite good enough or it’s not worth it to spend it there. Let’s save it for a rainy day. Or let’s save it so we can get that free agent in 2016.’”

“The baseball department is spending every dollar that is allocated to baseball operations,” Epstein continued. “Yeah, we’re spending it in the draft and we’re spending it in the minor leagues. There’s only so much you can spend there. We’re also spending every dollar we have available on the Major League payroll. We need a renovated Wrigley Field to produce more revenue. We need new TV deals so we can generate significant local revenue that way.”

Epstein then pointed out the inherent disadvantage the Cubs face in the newly-devised draft, in which each of the other four teams in the NL Central are getting competitive balance picks after the first round, because of their market size. The Cubs don’t get such picks. At the same time, Epstein said, those teams have escalating payrolls, and two have passed the Cubs. That is why, he underscored, the renovation and the TV deal are so important.

I don’t quite know how to take these comments. Epstein is clearly frustrated, but I can’t tell whether he’s frustrated by the media’s repeated questions that (he believes) unfairly paints the Cubs’ financial situation, or whether he’s frustrated by a lack of resources. If it’s the latter, I can’t tell whether he’s frustrated by a city that has been so intransigent in allowing the Cubs to generate the revenue that they could be generating, or whether he’s frustrated by (what he perceives to be) a tight-fisted owner. I suspect that folks will take Epstein’s comments to support whatever pre-existing beliefs they already held.

To me, it sounded a bit like Epstein was doing some selling. Let us get the renovation done the way we want. Let us shop around for the biggest, best TV deal. That’s how we return to competitiveness financially.

Is it legitimate? Is it plausible that the Cubs’ revenues allow them to have just the third largest payroll in the NL Central, even if every dollar available is being spent on the Cubs’ product? I don’t expect the Cubs to open their books, and I found the Forbes estimations to be far from reliable, but I think, in light of these comments, it’s fair to start wondering where all the money is going.

Contrary to Epstein’s comments here, we had been led to believe that current revenues were potentially being rolled over into future years. From Jed Hoyer, last September: “All the money [that comes in the door] will go back into the team in some form or another whether it’s things that can help us in the future, whether it’s free agents or keeping money aside for the next free agent class. All the money baseball operations is given will always go back to the club.”

If that isn’t true, and if the Cubs’ revenues justify a mere $100 million payroll with no rollovers from year to year, it becomes very difficult, as an outsider, to discern what is happening to the rest of the Cubs’ revenues. Sure, I can piecemeal parts of it with amateur spending, Dominican facilities, and Wrigley upkeep, but I’m not sure I can get from $100 million to the realistic level of Cubs revenues. I’m sure a large portion of that difference comes in the form of debt service payments, about which I’ve previously expressed my frustration. (In short: using Cubs revenues to make Ricketts Family debt payments is not putting that money back into the Cubs organization, it is putting the money, essentially, into the Ricketts Family’s pockets. I don’t blame them for doing it – they own the team, and this is their revenue – but I’d at least like to see an acknowledgement that, because of these debt service payments, not every single dollar that comes in the door is going back into the Cubs product.)

Ultimately, fairness dictates that I concede that which I do not know. When it comes to the Cubs’ finances, I – like you – know virtually nothing. It’s entirely possible that, if the Cubs did open their books and show us their financial statements, we’d all go, “Oh, they really are spending all that they can. How about that.” We just don’t know. So I’m in no position to cast aspersions.

But, with every Epstein statement that is more difficult to square with what we previously believed to be true, I have to watch the financial story more closely.

*I have to wonder to what extent Epstein would love to answer this question with something he’s said before: if you’re not going to make the playoffs anyway, there’s no value in winning 75 games as opposed to 65 games. Indeed, it’s actually worse for you long-term to win 75 rather than 65, because it affects your draft position and international spending. I suppose he felt he could say that in response to this particular question, however, because then you’re essentially admitting that this team was built to be a loser. I can understand why he can’t admit that, even if I do believe that the team was built with sellable assets (and the attending losses) and 2014 in mind, rather than 2013. I also think that was the right approach all along, but I’m getting off point. Sort of.

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